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Weekly Cartoons:

Via Glasbergen-

Interesting Videos:

Negroponte & Tim Berners Lee on the Web - via MIT- Berners-Lee asks for involvement from technology literate citizens in addressing issues of access equity (only 25% of the world is connected to the web). He views this as a matter of “human rights,” given the way the web is integrated into government, business and culture. The web now has 1011 pages, about the same number as neurons in the brain, and Berners-Lee would like to formalize a “science to study this thing, to understand how information propagates across it,” he says. “Humanity is connected by technology,” and “we have a duty to think about the protocols that affect it.”

Why Are Finland’s Schools Successful? – via Smithsonian- Ninety-three percent of Finns graduate from academic or vocational high schools, 17.5 percentage points higher than the United States, and 66 percent go on to higher education, the highest rate in the European Union. Yet Finland spends about 30 percent less per student than the United States.

Lets face it– in life its all about who you know- via HBS- An old adage says that it’s not what you know, it’s whom you know. But outsiders can take heart: even for those who don’t belong to a high-power social network, there’s power in simply keeping track of who went to school with whom.

David Brooks on Happiness - via NYT- I can’t resist concluding this column with some kernels of consumption advice accumulated by the prominent scholars Elizabeth W. Dunn, Daniel T. Gilbert and Timothy D. Wilson. Surveying the vast literature of happiness research, they suggest: Buy experiences instead of things; buy many small pleasures instead of a few big ones; pay now for things you can look forward to and enjoy later.

Economic Inequality Is Linked To Biased Self-Perception – via PsychScience- Pretty much everybody thinks they’re better than average. But in some cultures, people are more self-aggrandizing than in others. Until now, national differences in “self-enhancement” have been chalked up to an East-West individualism-versus-collectivism divide. In the West, where people value independence, personal success, and uniqueness, psychologists have said, self-inflation is more rampant. In the East, where interdependence, harmony, and belonging are valued, modesty prevails.

You are driven to create and form groups and then believe others are wrong just because they are others. - via You are Not So Smart- In a political debate you feel like the other side just doesn’t get your point of view, and if they could only see things with your clarity, they would understand and fall naturally in line with what you believe. They must not understand, because if they did they wouldn’t think the things they think. By contrast, you believe you totally get their point of view and you reject it. You see it in all its detail and understand it for what it is – stupid. You don’t need to hear them elaborate. So, each side believes they understand the other side better than the other side understands both their opponents and themselves.

Honey Money: The Power of Erotic Capital by Catherine Hakim – via Guardian- In a typically razor-sharp exchange of dialogue which establishes – yet again – that The Simpsons provides the most coruscating illumination of contemporary mores, Lisa says to her grade school teacher that “Good looks don’t really matter”, to which Ms Hoover replies: “Nonsense, that’s just something ugly people tell their children.” Stripping away the layers of irony from this statement we can reveal the central premise of Catherine Hakim’s book, which is that not only do looks matter, but that they should matter a great deal more. Furthermore, the people who tell young people – and in particular young women – that their beauty and sex appeal are of little importance are themselves ugly, if not physically then at least morally. For, as Hakim sees it, it is an “unholy alliance” of wannabe patriarchs, religious fundamentalists and radical feminists who have – in Anglo-Saxon countries especially – acted to devalue what she terms “erotic capital”. In Hakim’s estimation, for all young women, and in particular those who are without other benefits – financial, intellectual, situational – an entirely legitimate form of self-advancement should consist in their getting the best out of – if you’ll forgive the pun – their assets.

Influence—Framing Effects, Default Effects, and Trust – via Cognition & Culture- Framing effects and default effects are often seen as examples of inconsistent preferences and are usually explained in purely intrapersonal cognitive terms. We argue that these effects can be explained in rational, social terms, at least in part. First, frames and defaults are usually generated by another social entity (e.g., a speaker, a policymaker). Second, speakers and policymakers tend to select frames and defaults in ways that convey choice-relevant information to decision makers (e.g., listeners). As a result, when listeners respond “inconsistently” to different frames and defaults, it need not indicate inconsistent preferences. In line with this social approach, we show that framing and default effects are decreased (and default effects might even reverse) when the source of a frame or default is distrusted. Viewing framing and default effects from a social, rational perspective leads to a deeper understanding of these phenomena and suggests novel predictions about when they will and will not occur outside the laboratory.

The Local-Global Flip, or, “The Lanier Effect”- via Edge.org- We tend to now be courting the seedier side of capitalism more than the dignified side of capitalism. There tend to be a lot of ambulance chasers, and snake oil salespeople who become our customers. Not all. There are some stories that are very positive. There’s the occasional person who builds a career by blogging, or getting on YouTube, or who can build a small business by selling ads on some of these services. Those people exist, but there’s a Horatio Alger quality where there just aren’t enough of them to create a middle class. They create a false hope rather than a real trend. And it’s plain as day that that’s the truth, that there aren’t hoards and hoards of these people, but just tokens.

Why Africa Is Leaving Europe Behind – via VC Circle- Today, by contrast they can point to improved economic figures, a reviving middle class and arguably, in places, more effective social control. Even Lagos – much rougher, larger, poorer and unequal than London – has never witnessed looting on the scale that took place in the former capital of empire last week, although inhabitants of the Nigerian mega-city have certainly competed when it comes to arson.

Your Emotions Are What You Eat: How Your Diet Can Reduce Anxiety – via There Are Free Lunches- “Emotions are biochemical storms in the body and brain,” she says. “The healthier your biochemistry, of course, the better the emotional and also the cognitive forecast.” Psychological issues have physiological underpinnings, she says, not the other way around. Nor are they a result of outside issues.

Life paths, life events, and personality trait change at the transition to university life. - via PsycNet- This longitudinal study examined the relation between continuity and change in the Big Five personality traits and life events. Approximately 2,000 German students were tracked from high school to university or to vocational training or work, with 3 assessments over 4 years. Life events were reported retrospectively at the 2nd and 3rd assessment. Latent curve analyses were used to assess change in personality traits, revealing 3 main findings. First, mean-level changes in the Big Five factors over the 4 years were in line with the maturity principle, indicating increasing psychological maturity from adolescence to young adulthood. Second, personality development was characterized by substantive individual differences relating to the life path followed; participants on a more vocationally oriented path showed higher increases in conscientiousness and lower increases in agreeableness than their peers at university. Third, initial level and change in the Big Five factors (especially Neuroticism and Extraversion) were linked to the occurrence of aggregated as well as single positive and negative life events. The analyses suggest that individual differences in personality development are associated with life transitions and individual life experiences.

When Power Makes Us Cruel – via Boston.com – When power makes us cruel Although absolute power is supposed to corrupt absolutely, a recent experiment suggests that power without status is the most corrupting. In the experiment, students were told they would be interacting with a fellow student in a business exercise and were randomly assigned to either a high-status “Idea Producer” role or low-status “Worker” role. They were then told that they and their partner would also be entered in a raffle after the study, but, regardless of role, each student had to select at least one task (from a list of 10, some more demeaning than others) for their partner to do to be entered in the raffle. Some of the students could make this selection without reciprocal consequences (i.e., high power), while others faced potential retaliation (i.e., low power). Students assigned to the low-status role but who were subsequently granted power selected the most demeaning tasks for their partners.

A History of Bayes’ Theorem – via Less Wrong- Sometime during the 1740s, the Reverend Thomas Bayes made the ingenious discovery that bears his name but then mysteriously abandoned it. It was rediscovered independently by a different and far more renowned man, Pierre Simon Laplace, who gave it its modern mathematical form and scientific application — and then moved on to other methods. Although Bayes’ rule drew the attention of the greatest statisticians of the twentieth century, some of them vilified both the method and its adherents, crushed it, and declared it dead. Yet at the same time, it solved practical questions that were unanswerable by any other means: the defenders of Captain Dreyfus used it to demonstrate his innocence; insurance actuaries used it to set rates; Alan Turing used it to decode the German Enigma cipher and arguably save the Allies from losing the Second World War; the U.S. Navy used it to search for a missing H-bomb and to locate Soviet subs; RAND Corporation used it to assess the likelihood of a nuclear accident; and Harvard and Chicago researchers used it to verify the authorship of the Federalist Papers. In discovering its value for science, many supporters underwent a near-religious conversion yet had to conceal their use of Bayes’ rule and pretend they employed something else. It was not until the twenty-first century that the method lost its stigma and was widely and enthusiastically embraced

Decision Making/ Behavioral Economics/Psychology/ Risk/ Sciences:

Super Size Me: Product Size as a Signal of Status- via Jstor- This research proposes that consumers’ preference for supersized food and drinks may have roots in the status-signaling value of larger options. An initial experiment found that consumers view larger-sized options within a set as having greater status. Because low-power consumers desire status, we manipulated power to test our core propositions. Whether induced in the lab or in the field, states of powerlessness led individuals to disproportionately choose larger food options from an assortment. Furthermore, this preference for larger-sized options was enhanced when consumption was public, reversed when the size-to-status relationship was negative (i.e., smaller was equated with greater status), and mediated by consumers’ need for status. This research demonstrates that choosing a product on the basis of its relative size allows consumers to signal status, illustrates the consequences of such a choice for consumers’ food consumption, and highlights the central role of a product category’s size-to-status relationship in driving consumer choice.

The Halo Effect: How It Polishes Apple’s and Buffett’s Image - via Zweig- In both cases, what psychologists have christened the “halo effect” was at work. In this quirk of the human mind, one powerful impression spills over onto our other judgments of a situation. The effect was first documented in the U.S. Army decades ago, when soldiers who earned high scores from commanders for one quality (such as neatness) also got high marks for entirely unrelated qualities (such as loyalty and physical strength).

Why Do Voters Dismantle Checks and Balances?- via NBER- Voters often dismantle constitutional checks and balances on the executive. If such checks and balances limit presidential abuses of power and rents, why do voters support their removal? We argue that by reducing politician rents, checks and balances also make it cheaper to bribe or influence politicians through non-electoral means. In weakly-institutionalized polities where such non-electoral influences, particularly by the better organized elite, are a major concern, voters may prefer a political system without checks and balances as a way of insulating politicians from these influences. When they do so, they are effectively accepting a certain amount of politician (presidential) rents in return for redistribution. We show that checks and balances are less likely to emerge when (equilibrium) politician rents are low; when the elite are better organized and are more likely to be able to influence or bribe politicians; and when inequality and potential taxes are high (which makes redistribution more valuable to the majority). We show that the main intuition, that checks and balances, by making politicians “cheaper to bribe,” are potentially costly to the majority, is valid under different ways of modeling the form of checks and balances.

Can “living in the present” be a bad thing? – via Bakadesuyo- The results indicate that present-biased individuals are more likely to have credit card debt, and have significantly higher amounts of credit card debt…

Overpredicting and Underprofiting in Pricing Decisions – via Wiley- This research examines sellers’ price-setting behavior and discovers a naturally occurring mismatch between sellers and buyers: Sellers who make a price decision often consider alternative prices and engage in the joint evaluation mode, whereas buyers who make a purchase decision see only the finally set price and are in the single evaluation mode. This mismatch in evaluation modes leads sellers to overpredict buyers’ price sensitivity and underprice their products. However, these effects apply only to products unfamiliar to buyers and without salient reference prices and can be alleviated if sellers are encouraged to mimic single evaluation when making pricing decisions.

How Word of Mouth Influences Story Tellers- via Jstor- Consumers frequently tell stories about consumption experiences through word of mouth (WOM). These WOM stories may be told traditionally, through spoken, face-to-face conversation, or nontraditionally, through written online reviews or other electronic channels. Past research has focused on how traditional and nontraditional WOM influences listeners and firms. This research instead addresses how specific linguistic content in nontraditional WOM influences the storyteller. The current article focuses on explaining language content, through which storytellers reason about why experiences happened or why experiences were liked or disliked. Four studies examine how and why explaining language influences storytellers’ evaluations of and intentions to repeat, recommend, and retell stories about their experiences. Compared to nonexplaining language, explaining language influences storytellers by increasing their understanding of consumption experiences. Understanding dampens storytellers’ evaluations of and intentions toward positive and negative hedonic experiences but polarizes storytellers’ evaluations of and intentions toward positive and negative utilitarian experiences.

When to delay the presentation of alternative information – via JSTOR- Delaying the presentation of some favorable information about an alternative (e.g., a product, service, brand, store, or cause) until after consumers have completed their pre-choice screening can increase that alternative’s choice share. While such a delay reduces the alternative’s chance of surviving the screening, it can actually increase its probability of ultimately being chosen. Evidence from five experiments demonstrates this preference-enhancing effect of the delayed presentation of favorable information, and it illustrates the underlying preference dynamics across decision stages associated with such a delay. The findings also indicate that this preference-enhancing effect is driven by a combination of two mental mechanisms—a shift in the decision weights of attribute dimensions (rendering dimensions on which a delay occurs more influential across all alternatives) and an overall preference boost for the alternative about which information is delayed.

Personality and obesity across the adult life span. – via PsycNet- Personality traits contribute to health outcomes, in part through their association with major controllable risk factors, such as obesity. Body weight, in turn, reflects our behaviors and lifestyle and contributes to the way we perceive ourselves and others. In this study, the authors use data from a large (N = 1,988) longitudinal study that spanned more than 50 years to examine how personality traits are associated with multiple measures of adiposity and with fluctuations in body mass index (BMI). Using 14,531 anthropometric assessments, the authors modeled the trajectory of BMI across adulthood and tested whether personality predicted its rate of change. Measured concurrently, participants higher on Neuroticism or Extraversion or lower on Conscientiousness had higher BMI; these associations replicated across body fat, waist, and hip circumference. The strongest association was found for the impulsivity facet: Participants who scored in the top 10% of impulsivity weighed, on average, 11Kg more than those in the bottom 10%. Longitudinally, high Neuroticism and low Conscientiousness, and the facets of these traits related to difficulty with impulse control, were associated with weight fluctuations, measured as the variability in weight over time. Finally, low Agreeableness and impulsivity-related traits predicted a greater increase in BMI across the adult life span. BMI was mostly unrelated to change in personality traits. Personality traits are defined by cognitive, emotional, and behavioral patterns that likely contribute to unhealthy weight and difficulties with weight management. Such associations may elucidate the role of personality traits in disease progression and may help to design more effective interventions.

Business/ Entrepreneurship/Finance/ Investing:

Conglomerates and Industry Distress – via Oxford Journals- Focusing on economic distress episodes in an industry, we estimate the effect of conglomeration on resource allocation. Distressed segments have higher sales growth, higher cash flow, and higher expenditure on research and development than single-segment firms. This is especially true for segments with high past performance, for unrated firms, and in competitive industries. Single-segment firms increase cash holding, and the diversification discount reduces during industry distress. Firms with high past performance acquire their industry counterparts, and firms with low past performance exit the distressed industry. Industries more prone to distress have greater conglomeration. Overall, conglomeration enables segments to avoid financial constraints during industry distress.

Torture in Bahrain Becomes Routine With Help From Nokia Siemens – via Bloomberg- The spy gear in Bahrain was sold by Siemens AG (SIE), and maintained by Nokia Siemens Networks and NSN’s divested unit, Trovicor GmbH, according to two people whose positions at the companies gave them direct knowledge of the installations. Both requested anonymity because they have signed nondisclosure agreements. The sale and maintenance contracts were also confirmed by Ben Roome, a Nokia Siemens spokesman based in Farnborough, England.

Time TO Heavily Tax Banker Bonuses- via Voxeu- As we approach three years since the fall of Lehman Brothers, the incentives that led the financial sector to take on too much risk still exist. This column argues that they will remain so long as governments continue to provide an implicit guarantee that banks will be bailed out. To tackle this, the authors dare to propose a tax on bonuses.

The Eclectic Mix:

How to Turn a Continent into A Subprime CDO - via Triple Crisis- The European sovereign debt crisis is little more than a huge ‘bait and switch’ perpetrated on the publics of Europe, by their governments, on behalf of their banks. We need to remember that what we refer to today as the ‘European Sovereign Debt Crisis’ began as a private sector financial crisis back in 2008, when ‘too big to fail banks,’ writing deep out of the money options on taxpayers, quite unexpectedly (to some) blew up. Fearing a financial Armageddon, governments transformed private bank debt into public debt via bailouts, lost revenues, lower growth, higher transfers, and yawning deficits. The unavoidable result across the European continent was a massive increase in government debt. While painting this as a story of fiscal irresponsibility has some plausibility in the Greek case, it simply isn’t true for anyone else. The Irish and the Spanish, I and S in the eponymous ‘PIGS’ were, for example, considered ‘best in neoliberal class’ in terms of debts and deficits until the crisis hit. Public debt is a consequence of the financial crisis, not its cause.